Hong Kong stock market plunges again… Related domestic ETN eventually delisted

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H index, lowest since October 2022
‘Samsung leverage… ‘Stop trading
5 major banks ELS loss expected to be KRW 6 trillion in first half

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As the Hong Kong stock market plummeted, concerns about early liquidation of related exchange-traded securities (ETN) became real. With Hong Kong’s H Index plummeting by more than 13% since the beginning of the year, and the loss of principal in the H index’s underlying equity-linked securities (ELS) growing like a snowball, domestic ETNs that use the H index as an underlying asset were also eventually delisted.

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The Hong Kong H Index, which collapsed below the 5,000 mark during intraday trading on the 22nd, closed at 5,001.95, down 2.44% from the previous trading day. On this day, the H index fell to 4,943.24, the lowest since October 31, 2022 (4,919.03).

In the aftermath of this, ‘Samsung Leveraged Hang Sengtech ETN(H)’ issued by Samsung Securities was suspended from trading from 3:55 pm on this day and will begin the delisting process from the 24th. The original maturity date of the ETN was July 19th, but the index value fell to 988.05 won at the end of regular trading on that day, giving rise to reasons for early liquidation. The Korea Exchange takes early liquidation measures to protect investors if the real-time index value of ETN falls by more than 80% compared to the previous trading day or is less than 1,000 won.

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Samsung Leveraged Hang Seng Tech ETN (H) is a product that tracks twice the daily return of the Hang Seng Tech Index, which is calculated from the top 30 technology-related stocks listed on the Hong Kong Stock Exchange. On this day, the Hang Seng Tech index took a direct hit, plummeting 3.10% compared to the previous day.

‘Samsung Leveraged HSCEI ETN(H)’, which tracks twice the Hong Kong H Index, is also at risk of early liquidation. The index value of this ETN fell to 1,701 won on this day. It fell 15.7% in one week. Samsung Securities announced an investment caution due to the possibility of early liquidation for four consecutive trading days starting on the 17th.

As the Hong Kong H index has plummeted 13.29% since the beginning of the year, fears of related ELS losses are growing. According to the financial investment industry, the loss rate of Mirae Asset Securities’ H Index ELS, which expired on the 17th, was confirmed to be 56.05%. It was higher than Kiwoom Securities’ H index ELS loss rate (51.72%), which expired on the 10th.

In particular, if the loss rate rises to 60% as is the current trend, the principal loss of ELS related to the Hong Kong H index sold by the five major commercial banks is expected to exceed 6 trillion won in the first half of this year (January to June) alone. According to the Financial Supervisory Service, as of November 15 last year, the total sales balance of H-index ELS was 19.3 trillion won. This year, 15.4 trillion won (79.6%) will mature, with maturities concentrated in the first quarter (January to March, 3.9 trillion won) and the second quarter (April to June, 6.3 trillion won). .

Source: Donga

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